The South Korean government won a complete victory in its second investor-state dispute settlement (ISDS) case brought by Iran's Dayani family. Along with fending off a 770 billion won ($550 million) damages claim, the government will recover about 4.8 billion won in legal and arbitration administrative costs.
Kang Joon-ha, director general of the Ministry of Justice's International Legal Affairs Bureau, said at a briefing at the Gwacheon Government Complex on the 30th that "the government won in full by unanimous decision of the tribunal in the second ISDS case filed against it by six members of the Dayani family in October 2021."
According to the ministry, the tribunal at the Permanent Court of Arbitration (PCA) dismissed all of the Dayani side's claims and ordered it to pay about 4 billion won, or 75% of the government's legal costs, along with about 800 million won in arbitration administrative costs.
The dispute dates back to the Dayani family's 2010 bid to acquire Daewoo Electronics. The family paid a 57.8 billion won contract deposit but was unable to recover it after creditors terminated the deal, citing the failure to submit a letter of investment commitment, among other reasons. The family filed its first ISDS claim in 2015, and in 2018 the tribunal ordered the Korean government to pay about 73 billion won plus interest.
After U.S. sanctions on Iran made remittances difficult, the government obtained approval from the U.S. Office of Foreign Assets Control (OFAC) and in 2022 paid 62.2 billion won of the 85.8 billion won in damages and interest. The remaining 23.6 billion won was deposited with a court in December of that year, in line with a court seizure and collection order stemming from litigation between Winia Electronics and the Dayani family.
The Dayani side filed the second ISDS claim, arguing that the delayed payment of damages had deprived it of investment returns. The tribunal, however, found that both the payment made with OFAC approval and the court-ordered deposit were legitimate. It also rejected the argument that a delay in paying damages could serve as grounds for a new ISDS claim.
Kang said of the ruling's significance that it "will effectively deter 'retaliatory arbitration shopping' that takes issue with procedural delays in negotiations or legitimate seizures by domestic courts."
With the Dayani ruling following victories this year in the Elliott and Schindler cases and the case brought by Chinese investor Peng Zhenmin, the government has blocked about 3.255 trillion won in potential outflows from state coffers. It plans to prepare for possible annulment proceedings by the Dayani side while also pursuing the recovery of its legal costs.
